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Fed Economist Slams Econ Bloggers

Econophile's picture




 

From The Daily Capitalist

Richmond Fed economist Kartik Athreya recently penned a criticism of economics bloggers that has exploded over the blogosphere. Basically he says that professional, PhD-educated economists can be trusted because of their rigorous methodology. Bloggers (most), he says, aren't to be trusted. I have responded to his critique:

Dear Dr. Athreya:

I am an economics blogger and I very much enjoyed your think piece on economics and blogging (“Economics is Hard. Don’t Let Bloggers Tell You Otherwise”). I was prepared to hate it because I believe you are talking about me. But on cooler reflection I think you make some good points. They just aren’t the ones you intended to make.

The premise of your article is that PhD trained economists have a system of thinking, analysis, and critique that assures readers that their pronouncements aren’t plainly wrong within the framework of contemporary economics, that they have some merit, and are subject to rigorous review by their peers. This methodology yields greater economic truths.

You argue that statements made by many bloggers, right and left, are uninformed and incorrect, and do not go through the same rigorous vetting process as do the statements of professional economists. Thus, blog reader, you say, “Caveat emptor.”

In the spirit of full disclosure, I am not an academically trained PhD economist. Mea culpa. I studied Paul Samuelson’s book in my college econ coursework and I have been trying to unlearn it ever since.

It’s important for anyone to evaluate the statements you made about bloggers to first understand your economic philosophy. Everyone has a certain perspective on the study of economics through which we base our opinions.

While I don’t know exactly what your economics philosophy is, you told me it was “Garden variety economics as taught in most schools, ‘neoclassical’ I suppose.” I think I can make certain assumptions based on your education (University of Iowa) and by the fact that the Fed hired you to toil in its vineyard.

Would it be fair to say that you are an empirically based neoclassical econometrician?

I don’t mean to sound disrespectful when I say that such statements, especially to the consumers of economic opinions, sound arrogant. While your respect of the fallibility of economics reveals a more humility than arrogance, it is your conclusion that this professional methodology is the key to economic truth. And that is subject to discussion.

I will argue that the “scientific” methodology you describe is flawed and, more often than not, especially when used to make policy decisions, has been mostly wrong. Recent economic events have borne out my assertion.

As you know we have fallen into the subject of epistemology, or the science of how we know what we know.

Before I get to that topic, I would say that I agree with your conclusion that many bloggers are plainly wrong, and their analysis of economic phenomenon is mostly irrelevant, not to mention less rigorous. But I think their faults lie mainly with bad theory rather than sloppy, unvetted analysis.

I also will argue that many professional economists are plainly wrong because of bad theory despite the rigorous scientific process you propose as being the proper methodology. I will go further and argue that econometrics is a faulty path to economic truth.

Getting back to epistemology, I am impressed with your high confidence in your belief structure. So I ask this question: how do you know your approach to economic truth is correct? If you will answer that it is based on empirical research, then I would ask you two questions:

Question 1: How do you know which data to measure?

As you point out in your article, the economy is a huge stage with millions of actors making multiples of millions of economic decisions every day. And you are correct to point out that “one has to think hard about many, many things.”

So, how do you even know if you are selecting the right data? How do you know if your data set is big enough? How do you know if your statistical conclusions are based on the right data set? How do you know if you are ignoring factors that aren’t easily measurable? And, more importantly, how do you know if your conclusions are not merely empirically tautological?

I would suggest that, other than painting with a very broad brush, econometric empirical research is a false science. And I would point you to the recent statement of a famous economist [emphasis mine]:

[I’d] like to offer a few thoughts today about the inherent unpredictability of our individual lives and how one might go about dealing with that reality. As an economist and policymaker, I have plenty of experience in trying to foretell the future, because policy decisions inevitably involve projections of how alternative policy choices will influence the future course of the economy.

 

The Federal Reserve, therefore, devotes substantial resources to economic forecasting. Likewise, individual investors and businesses have strong financial incentives to try to anticipate how the economy will evolve. With so much at stake, you will not be surprised to know that, over the years, many very smart people have applied the most sophisticated statistical and modeling tools available to try to better divine the economic future. But the results, unfortunately, have more often than not been underwhelming.

 

Like weather forecasters, economic forecasters must deal with a system that is extraordinarily complex, that is subject to random shocks, and about which our data and understanding will always be imperfect. In some ways, predicting the economy is even more difficult than forecasting the weather, because an economy is not made up of molecules whose behavior is subject to the laws of physics, but rather of human beings who are themselves thinking about the future and whose behavior may be influenced by the forecasts that they or others make. To be sure, historical relationships and regularities can help economists, as well as weather forecasters, gain some insight into the future, but these must be used with considerable caution and healthy skepticism.

You might not recognize these words coming from Ben Bernanke. It is almost if he was channeling the great Austrian economist, Friedrich von Hayek. I don’t know if you have read Hayek, but he was known for his work in epistemology in economics.

This excerpt is from Hayek’s Nobel award lecture:

This brings me to the crucial issue. Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones. While in the physical sciences it is generally assumed, probably with good reason, that any important factor which determines the observed events will itself be directly observable and measurable, in the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process, for reasons which I shall explain later, will hardly ever be fully known or measurable. And while in the physical sciences the investigator will be able to measure what, on the basis of a prima facie theory, he thinks important, in the social sciences often that is treated as important which happens to be accessible to measurement. This is sometimes carried to the point where it is demanded that our theories must be formulated in such terms that they refer only to measurable magnitudes.

The title of his lecture is “The Pretense of Knowledge.” He referred to this false scientific approach to social sciences as “scientism,” a pretention of science that was rather more of a superstition. I urge you to inquire further and read his entire speech.

I would propose that the methodology you and your fellow Fed economists use is “scientistic” and false.

Question 2: What was the basis of your original query?

In other words, where do you come up with your ideas for a research project? Do they just pop into your head or do you have a theory about how the economic world works and proceed from there? I suspect it is the latter.

If it is based on a theory, then how do you know if it is a correct theory? You can’t say that it’s based on empirical research because that results in a circular argument. Which comes first? It is obviously the idea or theory.

If you start out with a bad theory and “prove” it with data which you don’t know is accurate or not, then what good is the theory or the result?

The only way to prove a theory is by logic, specifically (synthetic) a priori inquiry. This is the great discovery of the Austrian theory scholars, especially Ludwig von Mises. Mises developed an entire methodology of human behavior based on this form of reasoning.

It’s not that Austrians don’t believe in mathematics or empirical research, it’s just that empirical research is a very limited tool for proving or disproving economic truth. And a priori reasoning is the better method of understanding human behavior.

In my opinion the best thinking comes from the Austrians. But it’s tough to grasp and study. As you say, such thinking is hard, very hard. In fact I challenge you to read Ludwig von Mises’s magnum opus, Human Action, and then come back and tell us if you feel the same way about your faith in professional methodology. I think that’s only fair. Since I have studied your methodology you ought to take a stab at mine. Otherwise I could say that your viewpoint is more naïve than arrogant. If you need a copy, I would be delighted to provide you with one, gratis.

To use your argument, I would say that the general public is being had by the bulk of professional economist because they offer nothing very useful or accurate by which to make economic decisions, and their policy suggestions have been proven drastically wrong by recent events. If you wish examples, I can direct you to articles from my blog, The Daily Capitalist.

Your article validates my assertion that you and most econometricians are woefully ignorant of epistemology, theory, and economic methodology. Anyone with a complete education in economics would understand the limitations of the methodology used by mainstream economists. Such an educated person certainly wouldn’t flatly pronounce that they have a corner on economic truth without understanding the full implications of that statement. And with all due respect, I don’t think you do, which makes your belief in your methodology more of a religion than a science. Thus you do not have the proper foundation to criticize other economists or bloggers, professional or not.

I found your piece to be a bit of sour grapes. You are criticizing bloggers rather than yourself engaging in that arena. If, as you believe, sloppy and incorrect data abounds in the blogosphere, then your response should be to correct it by presenting articles that meet your standards rather than just complain about it. You would have to compete for an audience based on subjects that are relevant to most economics blog readers such as economic policy and trends, finance, and investing. I know you’re busy but so are most bloggers.

It’s not an easy forum in which to get noticed. It’s also a no-holds-barred arena where your critics aren’t polite professional economists. On the other hand it gets you read if you succeed. My posts get up to 12,000 reads each which, I would guess is more readers than you presently attract.

Dr. Athreya, I think you fail to appreciate what blogging is. I can’t speak for most bloggers, but for myself and the bloggers that I follow, I believe they are well founded in theory, are thoughtful, and often have insights missed by the pros.

With the world moving so fast, how else would you suggest consumers of economic news make sense of what is happening? Since “professional” research takes months and months to produce, it isn’t feasible to comment on quick moving events and meet those standards, as flawed as they may be.

I think we bloggers are providing a valuable service to consumers of economic news. And, if we are wrong too often, then we disappear from the scene.

Do you care to join us?

Sincerely,

Dr. Jeffrey Harding

 

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Sat, 07/03/2010 - 16:54 | 450962 End Game
End Game's picture

Put up your data or shut up.  In the absense of quality analysis from the Fed and the PhDs, the information void will be filled and the free virtual market will decide.

Sat, 07/03/2010 - 18:31 | 451023 RichardP
RichardP's picture

The free market does not decide economic policy for the U.S.  The Fed and others do that.  Athreya's point stands.  He was discussing inputs to making economic policy.  He was not simply talking about people discussing economics.

There are many approaches to knowledge.  But once the group has selected a leader (the Fed head in this case), input to the leader must be in the form that the leader desires or it will be ignored.  Athreya's comments were about the process of generating information in a form that the Fed head would pay attention to, not about what is ultimate truth.

 

Sat, 07/03/2010 - 15:52 | 450925 Romford_Dave
Romford_Dave's picture

I've read and re-read Kartik Athreya's paper and to borrow one of the tag lines of an English blogger, I just don't buy it.

That is I don't buy the hysterical reaction from a number of people who perceive (wrongly in my view)that his observations are critical of them per se.

Or maybe I'm reading it wrong?

Perhaps I'm reading it using my 'yeah that makes sense' calmly rational inner voice, rather than joining in with the melee of stone throwers intonation that mouth out loud each word of the article and getting ever more irrationally exuberant.

The main thrust of his article surely left the reader thinking that Kartik questioned his own ability along with that of his peers despite many years of learning, concluding that at best, they were in a less darkened room than the vast majority of opinioned posters.

Seems a reasonable conclusion to me, or am I in that uncomfortable crowd of 1?

Fri, 07/02/2010 - 22:02 | 450360 RichardP
RichardP's picture

My difficulty with comments by nmewn and Gunny is this:

Assume the U.S. had lived according to Austrian thought since inception.

a.  America would be a different country today.  A priori knowledge, before experience, true by definition.

b.  American would be a better country today.  True by definition?  Knowable before experience?

How is it possible to know, from lying on the couch, without experience, that America would be better today if it had been governed all along by Austrian thought?  All you can do is predict that it would be better.  In order to know, the experiment would have to be run and data collected and analysed.  Which gets us back to that experience thing.

Would you ride in a rocket to the moon that had been built based on a priori effort?

 

Sat, 07/03/2010 - 11:47 | 450691 nmewn
nmewn's picture

Economists tend to speak in algebraic riddles for the most part, not unlike the priests of old...LOL...no knock on priests, let's not get side tracked.

I'm not sure I'm going to say anything you don't already know.

"How is it possible to know, from lying on the couch, without experience, that America would be better today if it had been governed all along by Austrian thought?"

Well, I would answer that by saying there was study of economics long before there was a person called Keynes or Hayek. If memory serves King Croseus was the first to debase currency. The topics do intertwine.

Consider what "is" known or what was known before Keynes as we sit on the couch.

Debt is the product of someone else's labor that you have borrowed from him with a promise to pay back with interest. Debt must be retired, that is, paid off or defaulted on.  Those are the only two plausible possibilities as we can assume whomever loaned the principle wants this money back plus the agreed upon interest (per the contract, the bond).

Now, a priori, people intuitively know that a default is bad. They would not be able to get credit at reasonable interest rates should they default. This is why you see people with the ability to, paying off their liabilities now.

So it must follow that governments are no different as they use the same currency as the guy on the couch. Yes, they can print, but this is the same as paying off one credit card debt with a newly issued credit card...the principle (the gross amount owed) is not affected only the interest payment on the principle. And the government is debasing the value of it's own currency by doing so (printing).

So on a societal level, I think Austrian's can rightly claim that profligate spending by government (read Keynesian theory) is just common thievery on a more massive scale. It steals from the rich as well as the poor by debasing the currency. The "money created" by the debt was not created with labor or a more productive output bringing in foriegn currency to convert into greenbacks. It is vapor.

I've seen points made that Keynes theory was meant to be a "booster" shot, not a way of running the ship of state. Well that's all fine and good but someone does pay for the shot. And I remain unconvinced, with his Fabian background, that "the plan" all along was not sound economic policy, but control of the societies that it touches.

Which is diametrically opposed to the freedom of a society where Austrian principles are followed. That is, you live within your means or you can pay above your means and it ends rather quickly at no cost to anyone else, in freedom or wealth.

That is my thoughts on it anyways.

Regards.

 

 

Sat, 07/03/2010 - 18:20 | 451018 RichardP
RichardP's picture

"How is it possible to know, from lying on the couch, without experience, that America would be better today if it had been governed all along by Austrian thought?"

Well, I would answer that by saying there was study of economics long before there was a person called Keynes or Hayek

Exactly - and that is why I had difficulty with your comments re. a priori stuff.  The down-to-the-bone definition is "before experience".  If you toss experience into a decision model, and use the term a priori, it confuses me.

I take the restatement of your thoughts directly above to be a refined statement of your position.  And since you allow for making future choices based on an examination of past results, I no longer have an issue.  Other than restating that I think the term a priori and basing future decisions on past results are mutually exlusive approaches - based on the commonly-accepted definition of the term a prior.  (I'm relying on Wikipedia for that definition in this instance.)

Sat, 07/03/2010 - 22:08 | 451198 nmewn
nmewn's picture

We agree.

"restating that I think the term a priori and basing future decisions on past results are mutually exlusive approaches"

I think I see where we got to this, Mr. Harding's "The only way to prove a theory is by logic, specifically (synthetic) a priori inquiry." statement.

We can't, with certainty, build models to accurately forecast future actions by people. It's impossible to know the behavior of people long term or any variables of future events. But we can examine past behavior and logic.

It doesn't take a great deal of skill to realize whether helicopter Ben dropped untold sums on people running around laughing in the street or onto stoic bank's rooftops, the end result would be the same with the passage of time.

Spike & crash again.

For me, I'm glad that the system is being challenged and optimistic of the future. The mere fact that pedigreed elites deign to comment on the great unwashed, who are skeptical of their nannyism, speaks volumes of their credentials and stewardship...LOL.

I'm going to enjoy my Independence Day hope you do as well.

SeeYa

 

 

 

Fri, 07/02/2010 - 22:26 | 450380 Gunny
Gunny's picture

I am not arguing, necessarily, that the world would be better place today had Hayek prevailed and not been marginalized by his, above all, his being teutonic rather than anglo-saxon.  I do believe that the world would have been better off, incidentally.  But what I object to being a practitioner in capital markets is that economics is based on a false science because it is meant to predict the actions and intentions of "something" inherently unknowable.  The hubris, particular of neo-keynesians like Bernanke and Krugman, that they think they can therefore should be trusted to enact policies that inform their "predictions".  In absence of a true science, perhaps the best action is not to act at all.  A hard deep recession engendered by the collapse of the global fiat currency system is probably the cure required.

Fri, 07/02/2010 - 21:35 | 450331 tom a taxpayer
tom a taxpayer's picture

I am live grogging...er, live blogging Wall Street the movie.

Fri, 07/02/2010 - 21:03 | 450300 Gunny
Gunny's picture

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The transcendental idealists (Kant and Schoepenhauer) had already proved that economics cannot ever be a science.  That is because noumenal world or "real reality" behind the phenomenal world that we perceive is inherently unknowable.  This undifferentiated noumenon (somewhat akin to the rather pedestrian concept of the “force” in Star Wars) resides in all things, both animate (alive) and inanimate.  The noumenon manifests itself in laws of nature in inanimate objects but as “will” in living things.  Laws of nature; however, are a lower order manifestation of the noumenon and are both perceivable and measurable but our finite brains.  However, acts of will in living beings are not caused by reason or consciousness but by the motive power of the unknowable noumenon. 

 

What I am getting at is since the nature of noumenon is not knowable, hence, we can never develop a science that can anticipate or “forecast” its collective will as manifest in the aggregate mind of humanity.  Had the early Economists ever bothered to study philosophy, they would have since this limitation immediately and gone back to studying astrology or alchemy or whatever arcane science from whence they sprang.

Fri, 07/02/2010 - 20:34 | 450275 nmewn
nmewn's picture

Masterful Jeff, well done on many levels.

Specifically;

"The only way to prove a theory is by logic, specifically (synthetic) a priori inquiry. This is the great discovery of the Austrian theory scholars, especially Ludwig von Mises. Mises developed an entire methodology of human behavior based on this form of reasoning.

It’s not that Austrians don’t believe in mathematics or empirical research, it’s just that empirical research is a very limited tool for proving or disproving economic truth. And a priori reasoning is the better method of understanding human behavior."

As I believe economics is about nothing BUT human behavior, I have found it astonishing that socialist eggheads have not grasped this concept. Or perhaps they have...just not in a beneficial way to ALL of society ;-)

Much appreciated post.

 

Fri, 07/02/2010 - 19:39 | 450219 RichardP
RichardP's picture

The one conceit in the blogosphere is that they all know enough to know what would have happened world-wide if we had just let everybody fail after Bear-Stearns and Lehman Bos.  The fact is, we don't know.  Some of us know that we don't know.  Others of us don't know that we don't know.  Bernanke may have been acting simply to protect his cronies.  But there is another possible motivation:  he perhaps knew that he didn't know, and so chose the safest (to him) course of action.

It has been said that, if you don't know (or don't care) where you are going, any road will get you there.  On the other hand, if you have a destination in mind, only the known roads will be taken.  The unknown roads might get you to your destination also.  But since you don't know if they will, you stick with what is known.  And you reject what is not known.

If one has a goal (more or less loosely define), that goal becomes the standard.  Feedback loops are implemented to measure progress relative to the standard, either movement toward or away from.  Cybernetics is a fairly well-thought-through system of thought that explores this phenomenon.  It is a process that is applied to any organism that seeks a goal or standard.

If you don't know (or care) where you are going, then standards and feedback loops are unnecessary.  But if you decide you want to have a goal, then behavior must be motivated and specific.

Q1:  How do we as a nation decide whether we want to have a goal and standards to move toward or away from, rather than just wandering aimlessly?

Q2:  how should we have decided what to do at the time when Bear-Stearns and Lehman Bros. failed?  Should we have taken a poll?

Q3:  There can only be one leader.  When Bear-Stearns and Lehman Bros. failed, which of the bloggers in the blogosphere should we have picked to choose how we should have responded?  How would we have picked that one person?  Would we have all agreed on the choice?  (I understand the value of a board of directors as protection against momentary stupidity, but boards of directors usually have an alpha person.)

When organizations decide the want to have a goal, rather than wander aimlessly, they organize themselves so that they can answer their own versions of Q1 - Q3 above - as effectively and efficiently as possible.  The United States, as an organization has done this also.

For better or worse, whether right or wrong, we as a nation have chosen to have a Federal Reserve head.  The head was (presumeably) confronted rather suddenly with a choice:  let them fail (a path into the untried and unknown) or rescue them (also a path into the unknown, but with reasonably knowable consequences).  Because we as a nation have chosen to have a leader and to progress toward a defined goal, the Fed Head was required to make a choice.

How do we choose?

Libraries full of books have been written on the subject.  The field of cybernetics deals with the subject.  And Athreya's paper dealt with that subject.  In his own way, he was addressing the problem of listening to those who don't know that they don't know.  When you have chosen to have a directed path and a leader to take you down that path, you must shut out competing voices that are pointing down untested, unknown roads.  That is how goal-seeking, standard-matching organizations behave, particularly in a crises.  Few of the respondents to Athreya's paper seem to have gotten that point.

 

Fri, 07/02/2010 - 18:39 | 450124 tahoebumsmith
tahoebumsmith's picture

He is clueless, just like the rest of the lap dog econs the gov has working for them. Look at Krugman as an example, after the g20 he stood up in his high chair and shook his rattle because if the world stops the stimulation we are about to find out that all of his recommendations didn't work. How can you call yourself an economist when all you do is apply for another credit card when the rest are maxed to pay the balances? I could get the same affect by having my ten year old on the corner handing out bags of cash to all the banks as they drive by. Lets not forget that all the "PHD-educated" economists said we would not even have a recession? And all the PHD-educated financial wizards created the cdo and derivitive markets. When will these complete idiots just admit they are wrong? And everything they have done will make the situation worse? What I have learned most from this depression is I will not allow my kids to go to an Ivy League school and get a PHD so they can finish their lives as oxymorons preaching a bunch of bull shit that doesn't make any sense. I'm sure Kartik Athreya bows to Ben Bernanke every chance he gets? What a joke, the guy has studied the great depression so much i'm convinced he wants to create one bigger then 1929. All I got to say Kartik is, Why is it that the blogosphere always seems to be right? The answer is simple and you don't need a phd to figure it out... Because they tell the flippin truth!

Fri, 07/02/2010 - 18:33 | 450118 Gimp
Gimp's picture

The logic here is if economic projections are based on assumptions and we all have the ability to assume, then we are all economists! Who needs college training.

Fri, 07/02/2010 - 18:18 | 450103 RingToneDeaf
RingToneDeaf's picture

Econophile,

KarTick is simply one of many whiteheads on the bulbous ass of Academia. We appreciate you, but you wasted your time only to be insulted, we will do that here and still respect you in the morning.. If her ilk had their way a pHd would be required to teach his special education clients. As it is in academia, many with masters degrees cannot write at an 8th grade level. Look at the state of public education. We were forced to home school, could not have idiots infecting our children. All of this has its roots in false education.

When the inevitable revolution comes the Tories must not be allowed back into the country.

Fri, 07/02/2010 - 18:19 | 450101 Rainman
Rainman's picture

Economic projections are routinely based on ass-sumptions.

But it is the paymaster who ultimately determines the outcome of individual economic contributions. Determine the desired outcome, then build a data case backed with barrels of bullshit theory, formula, etc. that may or may not be relevant but sound supportive of said outcome. And it's all ireelevant and outdated the next day anyway.

Christine Romer is a classic. She sees no double dip on the horizon. Not a syllable flows from her to support her case . She clearly sees what she is paid to see. 

End of rant.

Fri, 07/02/2010 - 18:46 | 450134 New_Meat
New_Meat's picture

Rain, <rant++> YES projections are politically motivated.  Reality not need to apply.

But before the paymaster comes Physics, Thermodynamics, and Engineering.

Case in point: 1977 DoE encouragement of wind power at the same time that taxes are approaching what we will approach in next several years.  So a dentist can buy a windmill "condo" as a part of a farm (Altamont Pass, up-hill from  Palm Springs, others) and, with DoE tax credits/tax whatever can make some money/lose less money in taxes.  Look at them today--lotsa rusted metal and nil electricity production.

So we have contradictory data to go on our argument vs. stupid policy and advantage of the thermodynamic truth.  Will win in the end--win==predict  the outcome, not become advantaged.

Conclude: "Whose" economic projections?  John Kerry talked about the Big Dig being a financial bargain.  Our Tax Money at work.

And don't be too harsh with Christine--Even Dr. Doom is seeing no double dip, prob. because Krugman beat him to  it.

[Ed.: [\\rant]}

Happy Independence Day,

- Ned

 

Fri, 07/02/2010 - 17:38 | 450061 Prophetwithoutprofit
Prophetwithoutprofit's picture

I am a blogger and have a mere M.Sc in economics.  I find the article by Dr. Arthreya, naive, dangerous and offensive. I wrote a blog on Mr. Athreya's paper and have four main points:

1.  Society puts an overemphasis on credentials.  Zero Hedge makes the point perfectly you can learn from all men and women.

2. When you have to flaunt your credentials to give credence to the point you are trying to make, you are either incompetent or insecure or both.

3. PhD's like Greenspan and Bernanke could not see the financial crisis coming.  Further, their actions contributed to the crisis and have prolonged it. So much for PhDs.

4.  With the declince of investigative journalism in the print and television media, bloggers are the last line of journalism serving as a check on politicians and corporation.  Any attempt to discredit or silence bloggers is dangerous.

More on these points is contained in my blog.

http://www.prophetwithoutprofit.com/2010/06/30/he-who-is-wise-does-not-w...

Bloggers need to remain a vigorous counterbalance to the non-stop financial boosterim from the likes of CNBC, the Administration and the Federal Reserve.

 

Fri, 07/02/2010 - 19:28 | 450193 Nostradumbass
Nostradumbass's picture

May I suggest reading R. Buckminster Fuller's Operating Manual for Spaceship Earth?

Here is addressed over specialization and the hoarding of true knowledge whilst setting up educational systems to keep the masses humming along. Absolutely brilliant stuff.

Fri, 07/02/2010 - 18:31 | 450117 New_Meat
New_Meat's picture

Prophet--let's hope you attain some profit.

1.  No, too much discredited for "society," probably yes for MSM and certainly from other academicians.

2.  Yep.  and on the other hand, why the ad hominem attacks here are worse than useless.

3.  Don't know about "could not see", might be other constraints.  cf. Greenie's CNBS long interview, don't know if on web, just heard about it (and heard Bloomberg host lament that they need to get Greenie on).

4.  Decline?  Yep, except FT had something about Immelt with the Italians dissing Our Dear President.  Maybe reversing (certainly the London/GB reporting beats the Boston Globe).  Add Talk Radio and Glenn Beck's blackboard.

Bloggers need?  Said differently (and in full support of your sentiment)--WE NEED bloggers to...

- Ned

 

Fri, 07/02/2010 - 17:18 | 450032 Mercury
Mercury's picture

A well laid out piece Econ but this is like arguing with public school teachers - they're going to do what they're going to do and protect their turf and that's all there is to it.

BTW (I know you're a reader) - a few months old but here's a great, philosophically minded essay (take that Econ PhDs!) I just found on shadow banking and the credit crisis in The New Atlantis:

The modern mind broke down on account of its infatuation with abstraction. That mind is singularly susceptible to falsely imagining that ideas are more real than men. The power of the lapidary theory over the modern mind has been often remarked. The whole of the twentieth century was marked by calamitous wars driven by the imperial impulse of what Edmund Burke called “armed doctrines.” Armies, impelled by their doctrines, rolled over half the earth, leaving behind blood and smolders.

http://www.thenewatlantis.com/publications/the-financial-crisis-and-the-...

Fri, 07/02/2010 - 16:24 | 449923 Kayman
Kayman's picture

I do not wish to proffer my qualifications, but let me say that I would rather camp under the broad tent of "blogger" than pretend I am some officious pontificator protected from criticism by the paper shield of PhD. Econ.

Gentlemen, herein is the fatal flaw.  Trust and Honesty have now become the scarcest of scarce resources. And Trust and Honesty must necessarily be the foundation of all Economics- Theoretical or Real

Trust is lost and it will not easily return.  All the Ph.D's in the world amount to a hill of beans against the loss of Trust.

Fri, 07/02/2010 - 15:36 | 449819 hooligan2009
hooligan2009's picture

Where to begin. Hmmm.. I blog because, for the most part, blog sites provide news and perspective. I have a smattering of diplomas and (masters) degrees and I have personally spoken to and dealth with central bankers across the globe and a number of politicians.

Kartik has offered a polite reply and without being too rude, I would expect him/her to say that he was employed by the Fed rather than a blogger because he works long hours, on arcane matters that help his board make informed decisions.

This is not the issue. What is the issue is that Kartik prefers not to consider alternatives to courses of action. I am not an Austrian economist, nor a Keynesian, nor a communist, nor a complete free marketer, though I am a lot closer to the latter.

I would describe bloggers, for the most part, to be leaders of original thought and challengers of conventional wisdom. I would consider central bank workers as civil servants with a strong tendency to behave like librarians keeping things in order and making sure that people who make the decisions have accurate data.

Herein lies the rub. The Fed has engaged in manipulating data and has been forced (via its unofficial lender of last resort facility) to act as the nations "bad bank". Quite why the Government needs the Fed to do this I don't know. Maybe the Government knows it is too stupid to spell rehypothecation.

It is not a cental bank and, whilst Kartik will protect the status quo, we are migrating from a failed business and economic model into uncharted and unknown economic practise (not theory, ancient or modern). The change we are about to enter into is one akin to the migration of behaviour from - wandering tribes in the jungle to reacting to clear felling the amazon jungle.

There is no precedent or theory to explain this in the past. It simply hasn't happened on this scale. The world has moved on.

It is my contention that the Fed has removed the key function of money as a store of value and has also broken its use as a medium of exchange by treating the debasement of currency as a valid monetary policy setting. Japan and Zimbabwe both do this also. I am sure the central banks of both of thse countries would have better qualified economists that Kartik and actually enjoy reading blogs to spot emerging good ideas.

So well done Econophile for eliciting a polite response to a reposte to a pointless observation by a civil servant who happens to have a degree in what other people think.

Fri, 07/02/2010 - 18:15 | 450096 New_Meat
New_Meat's picture

+1 especially wrt the launch into the unknown practicum.  We have the knowledge of how things in fact can/do work in many different systems (I work with a former Soviet ICBM launch officer, we trade stories).  We have Hazlett to describe how things actually will happen, even with external distortions.

I would describe bloggers, for the most part, to be leaders of original thought and challengers of conventional wisdom. I would consider central bank workers as civil servants with a strong tendency to behave like librarians keeping things in order and making sure that people who make the decisions have accurate data.

Yes!  and my point is that one should consider the strivers who aspire to enter into this system.  Who would want to be a PhD. drone (what does it take to pass through all of the screens to get to a PhD in economics?).  How do they pass all of the filters to get there.

Evidently, it does not include knowing how to drive TurboTax, so there might be other "qualifications" that apply.

Jim Webb told his kids in VietNam: "You can tell me that the sky is brown, I'll believe you.  But never ever lie to me."  That is a standard of integrity that has been lost.

To our detriment.

Personnel selection processes are not a root cause of an organization's problem, but spot up close to root cause.

- Ned

 

 

 

Fri, 07/02/2010 - 15:30 | 449804 MarketFox
MarketFox's picture

Economists are only as good as their data and questions about it...

Whereby both the data and the questions are never complete....

And it is the common sense usage ...of the better inferential arguments ....that are most useful....

Book sense without real world common sense...is not practical....and can be very damaging...

ie Keynes....Bernanke....Smith....Greenspan...etc...all have proven...

The real world does not need academic experiments....with no consequences to the implementors....

Fri, 07/02/2010 - 15:01 | 449733 Bruce Krasting
Bruce Krasting's picture

Grreat piece. Tks.

Fri, 07/02/2010 - 14:28 | 449647 Econophile
Econophile's picture

I sent my article to Dr. Athreya and received the following email:

Hi Jeff-

Thanks for the link; I see that I am quoted verbatim.

I thought it made good points, and also thought it was nicely written.

Civil rebuttals like yours are great to have--I learn from them. 

And while I can offer no further comment at this time; I urge you to keep up your thoughtful approaches to the subject.

Warm Regards
Kartik

Fri, 07/02/2010 - 19:48 | 450228 Yer Dotter
Yer Dotter's picture

So, what's the difference between what these keynesian PhD's profess we should do and the history of the French Assignats?

http://www.usagold.com/gildedopinion/assignats.html

Fri, 07/02/2010 - 18:48 | 450141 septicshock
septicshock's picture

Can we please stop referring to non-physicians as doctors.  It sullies the term.  PhD's should not be referred to as doctors... no wonder medical doctors call themselves physicians to differentiate themselves from these morons who call themselves doctors.

I would be ashamed to call myself a doctor and fuck up society as bad as economists have done.  Even "master" of business is bullshit.  C'mon...  if we had so many masters and doctors of business why is this economy so FUCKED UP?

Sat, 07/03/2010 - 01:52 | 450522 Econophile
Econophile's picture

I, Sir/Madam, am a doctor of law (Juris Doctor). Maybe I'll start calling myself, "Dr."

Fri, 07/02/2010 - 21:02 | 450299 Dr. Sandi
Dr. Sandi's picture

Can we please stop referring to non-physicians as doctors.  It sullies the term.  PhD's should not be referred to as doctors...

On behalf of myself, Doctor Who, Dr. Demento and Doctor Detroit, I must take exception to your statement.

While not everyone called Doctor can set your broken spleen, there are quite a few physicians who are similarly unqualified.

 

Fri, 07/02/2010 - 20:02 | 450246 RichardP
RichardP's picture

The term "Doctor" refers to a specific level of study in a particular discipline.  Doctor of Medicine, Doctor of Philosophy, Doctor of Education, Doctor of Business, etc.  Just as the term "Bachelor" refers to a specific level of study.

All who have successfully completed the level of study at the "Doctor" level are entitled to use the term.

 

Fri, 07/02/2010 - 18:47 | 450139 maddy10
maddy10's picture

Confirms the fact that Fed 'eco-monists' deliberately give out such statements to confuse the Public even more.

Economics is as much a Science as Astrology is!

Dr Kartik should be asking UN why they are suggesting a new international currency when all the PhD's are there in Fed controlling the world in perfect harmony-

I won't bother to wait for his reply- ' to keep thoughtful approaches to the subject' huh

Do they realise that they are playing with peoples lives here....

None of these academics go to jail for being wrong; Period

None will vouch their lives in support of their 'theory'-

To conclude, Please handle with care

 

 

Fri, 07/02/2010 - 17:50 | 450075 Jean Valjean
Jean Valjean's picture

I remember in Dr. Athreya's original statment he spoke of economic complexities including analysis of the complex "feedback".

I want to point out that bloggers ARE the "feedback".  What the good doctor wants is for his economic analysis to be correct without hearing any unsettling "feedback".

Fri, 07/02/2010 - 17:17 | 450031 anarkst
anarkst's picture

Seems like a polite way of saying, "Who the hell cares what you think?"

Fri, 07/02/2010 - 19:25 | 450182 scratch_and_sniff
scratch_and_sniff's picture

yep, seems like that.

 

Its not patronising though.

Do NOT follow this link or you will be banned from the site!